US Treasury Chief Warns Taiwan’s Semiconductor Dominance Poses ‘Apocalyptic’ Economic Risk as Critical Minerals Alliance Takes Shape

US Treasury Secretary Scott Bessent has identified Taiwan’s overwhelming dominance in advanced semiconductor manufacturing as the gravest single threat to the global economy, warning that any disruption to the island’s production capabilities would trigger catastrophic consequences that could destabilize international commerce and national security across the developed world.

Speaking at the World Economic Forum in Davos, Switzerland on Tuesday, Bessent delivered an unusually stark assessment of the vulnerabilities created by the concentration of chip manufacturing in Taiwan, where an estimated 97 percent of the world’s most advanced semiconductors are produced. The Treasury chief described a potential blockade or destruction of Taiwan’s manufacturing infrastructure as nothing short of an “economic apocalypse” that would cripple industries ranging from artificial intelligence and consumer electronics to defense systems and automotive production.

“I would say that the single biggest threat to the world economy, the single biggest point of single failure, is that 97% of the high-end chips are made in Taiwan,” Bessent told forum attendees in remarks that underscored the Trump administration’s deepening concerns about supply chain vulnerabilities and geopolitical dependencies that have emerged as central features of the modern global economic landscape.

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Taiwan’s Semiconductor Stranglehold and Rising Geopolitical Risks

The concentration of advanced chip production in Taiwan represents an unprecedented convergence of technological capability and geopolitical vulnerability. Taiwan Semiconductor Manufacturing Company (TSMC), the world’s largest dedicated contract chipmaker, has emerged as the dominant force in cutting-edge semiconductor production, with the company holding approximately 70 percent of the global foundry market share as of 2025 according to industry analysts.

Even more striking is TSMC’s near-total control of the most advanced manufacturing processes. The company produces at least 90 percent of the world’s most cutting-edge chips, working closely with major technology firms including Nvidia, Apple, Broadcom, and Qualcomm to manufacture the processors that power everything from smartphones and data centers to military weapon systems and autonomous vehicles.

This concentration has created what security analysts describe as a single point of failure in the global technology supply chain. Any disruption to Taiwan’s semiconductor production—whether from natural disasters, Chinese military action, or other unforeseen events—would have immediate and cascading effects across virtually every technology-dependent industry worldwide.

Research published in scientific journals has highlighted the particular vulnerability of Taiwan’s semiconductor supply chain to potential Chinese quarantine scenarios. Academic studies using tabletop exercise and scenario analysis methods have determined that Taiwan’s semiconductor ecosystem would be especially vulnerable to maritime and aerial quarantine measures that China might employ before 2027, with such actions offering relatively low mobilization costs while delivering high disruption yields.

The geopolitical dimension of this vulnerability has become increasingly acute as tensions in the Taiwan Strait have escalated. China views Taiwan as a breakaway province and has not ruled out the use of force to achieve reunification, while the United States maintains a policy of strategic ambiguity regarding its commitment to Taiwan’s defense. The semiconductor industry sits at the intersection of this geopolitical fault line, with Taiwan’s chip-making prowess serving simultaneously as an economic asset and a strategic liability.

Relocating Production: The Long Road to Semiconductor Independence

Bessent emphasized Washington’s urgent efforts to relocate a significant portion of semiconductor manufacturing capacity to American soil and allied nations, though he acknowledged the formidable challenges involved in such a massive industrial reorganization. The Treasury Secretary outlined the need to move between 30 and 50 percent of advanced chip production away from Taiwan to the United States and partners such as Japan and potentially Middle Eastern nations.

However, the path to achieving meaningful diversification of semiconductor production faces substantial obstacles related to cost, expertise, and timeframes. TSMC’s experience establishing fabrication facilities in Arizona has illustrated these challenges vividly. The company announced plans in 2020 to build a $12 billion facility in Phoenix, but costs have since ballooned dramatically as the company discovered that construction expenses in the United States run four to five times higher than equivalent facilities in Taiwan.

These cost disparities stem from multiple factors including higher labor costs, stricter environmental regulations, more complex permitting processes, and the need to import specialized equipment and materials. TSMC has warned that chips manufactured at its Arizona facilities will cost at least 50 percent more than those produced in Taiwan, raising questions about the economic viability of extensive reshoring efforts.

The talent shortage represents another critical bottleneck. In 2023, TSMC warned that insufficient American technical expertise would require bringing Taiwanese workers to the United States for extended periods, delaying the Arizona fab’s operational timeline until 2025. The company has also noted that chips produced in Arizona will still need to be sent back to Taiwan for advanced packaging, highlighting the difficulty of replicating Taiwan’s comprehensive semiconductor ecosystem.

Despite these challenges, TSMC has committed to tripling its American investment, pledging an additional $100 billion toward expanding semiconductor production in the United States on top of the $65 billion already allocated for building three fabrication facilities in Arizona. This massive capital commitment reflects both the company’s recognition of geopolitical risks and pressure from Washington to reduce American dependence on Taiwan-based production.

Building a Critical Minerals Alliance to Counter Chinese Control

Beyond semiconductors, Bessent announced a major initiative to form a critical minerals alliance that would break China’s stranglehold on essential raw materials needed for advanced manufacturing, clean energy technologies, and defense systems. The Treasury Secretary revealed that the United States is working with the G7 nations plus Australia, India, Mexico, and South Korea to rapidly establish independent mining, processing, and refining capabilities for materials where China currently dominates global supply chains.

“We’re working rapidly to establish independent mining, processing and refining capabilities to prevent Beijing from wielding the sword over our heads,” Bessent stated, describing China’s control over critical minerals as a strategic vulnerability that threatens American national security and economic competitiveness.

The urgency behind this initiative reflects the stark reality of Chinese dominance across the critical minerals value chain. According to the International Energy Agency, China refines between 47 and 87 percent of the world’s lithium, cobalt, graphite, copper, and rare earth elements. More comprehensively, Beijing holds an average 70 percent share of production for 19 of the 20 most strategically important minerals, with an even tighter grip on processed rare earth magnets that are essential for electric vehicles, wind turbines, and advanced weapons systems.

On January 13, 2026, Bessent convened finance ministers from a coalition representing roughly 60 percent of global critical mineral demand to discuss coordinated strategies for diversifying supply chains away from Chinese control. The meeting brought together officials from Australia, Canada, the European Union, France, Germany, India, Italy, Japan, Mexico, South Korea, and the United Kingdom to examine tools such as price floors to stimulate non-Chinese rare earth supply, coordinated stockpiles, and pooled investment mechanisms.

The United States and Australia have taken concrete steps toward operationalizing this vision. In October 2025, Washington and Canberra signed a critical minerals pact with each country pledging at least $1 billion over six months to jumpstart new rare earth mines and processing plants. The agreement includes establishing a price floor mechanism designed to prevent China from using predatory pricing to undercut Western producers—a tactic Beijing has employed repeatedly to maintain market dominance.

Bessent cited progress already underway in his home state of South Carolina, where rare earth magnet production has resumed after a 25-year absence. The new EVAC rare-earth magnet processing center in Sumter represents the first domestic production of these critical components in a quarter century. Industry projections suggest American producers could meet most domestic demand for rare earth magnets within two years, significantly reducing reliance on Chinese suppliers.

“This is the first magnet made in the U.S. in 25 years—we’re ending China’s chokehold on our supply chain,” Bessent declared during a visit to the South Carolina facility, framing the development as part of a broader manufacturing revival that would create high-paying jobs while enhancing national and economic security.

Greenland Tariffs Escalate Trans-Atlantic Tensions

In a dramatic escalation of the Trump administration’s pursuit of Greenland, Bessent confirmed that the United States plans to impose 10 percent tariffs beginning February 1, 2026, on goods from eight NATO allies—Denmark, Norway, Sweden, France, Germany, the United Kingdom, the Netherlands, and Finland—if Denmark refuses to negotiate the sale of the Arctic territory. The levies would increase to 25 percent on June 1 if no agreement is reached for “the complete and total purchase of Greenland.”

President Donald Trump announced the tariff threat on his Truth Social platform, arguing that the United States has subsidized European nations for decades by not charging trade tariffs, and that “after Centuries, it is time for Denmark to give back—World Peace is at stake!” Trump characterized joint NATO military exercises in Greenland involving Danish and allied forces as a “very dangerous situation” that necessitates strong American action to ensure global peace and security.

The targeted European nations issued a joint statement condemning the tariff threats as actions that “undermine transatlantic relations and risk a dangerous downward spiral.” The eight countries pledged to “stand united and coordinated” in their response while remaining committed to upholding their sovereignty. They emphasized that the NATO military exercises in Greenland “pose no threat to anyone” and represent efforts to strengthen Arctic security as a shared transatlantic interest in response to increased Russian and Chinese activities in the region.

The European Union convened emergency meetings to discuss potential countermeasures, with French President Emmanuel Macron reportedly asking the bloc to activate its anti-coercion instrument—colloquially known as a “trade bazooka”—which would authorize sweeping retaliatory tariffs and other economic penalties against American goods. The EU is reportedly considering imposing tariffs on $108 billion worth of US products, alongside additional non-tariff barriers designed to inflict economic pain on American exporters.

Danish and Greenlandic leaders have consistently and emphatically stated that the autonomous territory is not for sale, and recent protests in both Denmark and Greenland have demonstrated popular opposition to American acquisition. Thousands of demonstrators turned out in Copenhagen, Aarhus, Aalborg, and Odense to show solidarity with Greenland, while an estimated 5,000 people—nearly 10 percent of Greenland’s total population of 56,000—protested in the capital city of Nuuk carrying banners reading “Yankee go home” and “Greenland is already great.”

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NATO Defense Spending and European Security Commitments

Defending the Trump administration’s confrontational approach toward European allies, Bessent emphasized that NATO members have finally agreed to meet long-standing defense spending commitments after years of underfunding their military capabilities. The Treasury Secretary noted that Washington has contributed $22 trillion to the transatlantic alliance since 1980—more than all other NATO members combined—while European nations diverted resources to social programs, infrastructure, and education rather than defense.

“It’s time for them to pay more,” Bessent declared, echoing President Trump’s frequent criticism of European defense spending levels. Under NATO guidelines, member states are expected to spend at least 2 percent of gross domestic product on defense, though many European nations failed to meet this threshold for years until recent Russian aggression in Ukraine prompted increased military budgets across the continent.

The Trump administration’s pressure on European allies reflects a broader shift in American foreign policy priorities, with Washington increasingly viewing European security commitments through an economic lens and demanding that allies shoulder a larger share of collective defense burdens. However, the simultaneous imposition of tariffs on NATO allies over Greenland has created tensions between the administration’s security demands and its trade policies, with critics arguing that threatening economic warfare against military partners undermines alliance cohesion at a time of rising global threats.

Progress on China Trade Negotiations and Fentanyl Cooperation

Despite escalating rhetoric over semiconductors and critical minerals, Bessent reported progress in certain areas of trade talks with Beijing. The Treasury Secretary confirmed completion of annual soybean purchases totaling 25 million tons, fulfilling commitments made in earlier trade negotiations. More significantly, he described the administration’s use of fentanyl-related tariff threats against Mexico, Canada, and China as successful in forcing cooperation on stemming the flow of synthetic opioid precursor chemicals.

Bessent noted “a substantial drop” in precursor drug flows after Chinese officials engaged in negotiations under threat of punitive tariffs. The Treasury Secretary added that tariff threats have proven effective in persuading Beijing to roll back certain export controls, pointing to China’s October 2025 decision to ease restrictions on rare earth exports as evidence that economic pressure can modify Chinese behavior on issues of concern to Washington.

Regarding fulfillment of agreements on rare earth magnet flows from China, Bessent characterized progress as “quite satisfactory,” though he provided no specific metrics or verification mechanisms to substantiate this assessment. The comments suggest that despite public confrontation over critical minerals independence, the United States continues to rely on Chinese rare earth supplies in the near term even as it works to build alternative sources.

Supreme Court and Tariff Authority Questions

Bessent dismissed concerns that the Supreme Court might block the Trump administration’s expansive use of tariff authority, calling it unlikely that the court would overturn what he described as the president’s “signature” economic agenda. The Treasury Secretary’s confidence comes as multiple legal challenges work through the federal court system questioning whether the executive branch possesses the constitutional and statutory authority to impose tariffs without congressional approval in the manner the Trump administration has employed.

Educational toy makers, wine importers, and other affected businesses have filed lawsuits challenging Trump’s tariff policies, arguing that they exceed presidential authority under existing trade statutes. The Supreme Court’s eventual ruling on these cases could have far-reaching implications for the scope of executive power in trade policy and the balance of authority between Congress and the presidency on economic matters.

Legal scholars note that while presidents possess significant discretion in trade policy under laws such as the Trade Expansion Act of 1962 and the Trade Act of 1974, the broad deployment of national security justifications for tariffs—including those related to Greenland acquisition—stretches these authorities in unprecedented directions. However, the court’s conservative majority has generally shown deference to executive authority, particularly in areas touching on national security and foreign affairs.

Broader Implications for Global Supply Chains and Economic Security

The convergence of semiconductor vulnerabilities, critical minerals dependencies, and tariff threats reflects a fundamental transformation in how major economies conceptualize national security in the 21st century. Traditional military and diplomatic considerations have merged with economic and technological factors to create a new paradigm where supply chain resilience ranks alongside conventional defense capabilities as a strategic imperative.

For the global technology sector, the implications are profound. Decades of supply chain optimization focused on efficiency and cost reduction have created single points of failure that now appear intolerable from a security perspective. The movement toward “friendshoring”—relocating production to allied nations—and “reshoring”—bringing manufacturing back to home markets—represents a partial reversal of globalization trends that have characterized the post-Cold War era.

However, achieving meaningful supply chain diversification faces formidable economic and technical obstacles. Taiwan’s semiconductor ecosystem developed over decades through massive capital investment, accumulated technical expertise, and supportive government policies. Replicating these conditions elsewhere requires not just financial resources but also time, specialized talent, and institutional knowledge that cannot be easily transferred or recreated.

Similarly, breaking China’s dominance in critical minerals requires comprehensive strategies spanning the entire value chain from mining and processing to manufacturing and recycling. Opening new mines represents only the first step; refining rare earth elements into usable materials demands sophisticated chemical processes and environmental management capabilities that few nations currently possess outside China.

The economic costs of supply chain reconfiguration will ultimately be borne by consumers and businesses through higher prices for semiconductors, batteries, electric vehicles, renewable energy equipment, and countless other products dependent on these materials and components. Whether democratic publics will accept these costs in exchange for enhanced supply chain security remains an open question that will likely shape political debates and policy choices for years to come.

Conclusion: Navigating an Era of Economic Nationalism and Strategic Competition

Treasury Secretary Bessent’s stark warnings about Taiwan’s semiconductor dominance and his announcement of a critical minerals alliance signal the Trump administration’s determination to reshape global economic relationships around principles of strategic competition and national self-reliance. The combination of efforts to relocate chip manufacturing, diversify critical minerals sourcing, and apply tariff pressure on allies over territorial disputes reflects a broader vision of economic nationalism that prioritizes security considerations over efficiency and integration.

Whether these policies will achieve their stated objectives of reducing American vulnerabilities while maintaining technological leadership and economic prosperity remains uncertain. The challenges are immense, spanning technical feasibility, economic viability, alliance management, and domestic political sustainability. What is clear is that the era of unfettered globalization and supply chain optimization without regard to geopolitical risk has definitively ended, replaced by a new period of economic competition where technology, resources, and production capacity increasingly function as instruments of national power and objects of international rivalry.

As Bessent and his counterparts in allied capitals work to build alternative supply chains and reduce dependence on geopolitical rivals, the global economic order continues its transformation toward a more fragmented, regionalized structure. The ultimate shape of this emerging system—and whether it can deliver both security and prosperity—will depend on policy choices, technological innovations, and geopolitical developments that will unfold over the coming decade.

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By: Montel Kamau

Serrari Financial Analyst

21st January, 2026